TMI Blog2003 (12) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... of apprehension: 3. Right at the outset, it was submitted by the learned AR of the assessee that ground No.5 is not pressed by the assessee. As such, the grounds which remain for adjudication are ground Nos.2, 3 4 in view of the fact that ground Nos.1 6 are general in nature. 4. The relevant facts of the case pertaining to ground Nos.2, 4 6 are that the assessee in the year under consideration derived income from rent, bank interest and from sale of space inDevikaTower.DevikaToweris a building constructed by Pragati Construction Co., a sister concern of the assessee's firm. The assessee filed its return showing an income of Rs. 22,650. The assessee has shown its income from sale of space inDevikaToweras a capital gain. The Assessing Officer, however, treated the same as a business income. The relevant facts as recorded in the assessment order are: - "The assessee firm is a builder and had constructedPragatiTowerat 26,Rajindera Place,New Delhi. The said building was sold on flat basis. In the meanwhile in the previous year relevant to assessment year 1981-82 the assessee firm invested Rs. 17.50 lakhs to procure space measuring 7000 sq. ft. in the basement ofDevikaTower,N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1987-88 short-term capital gain on sale of property has been assessed as such. Subsequently in his letter dated 29-9-1993 the learned counsel has stated that as per the partnership deed the firm came into existence only for one project and it has to cease its business on completion of all formalities. In this regard assessee's contention is not acceptable because of the following reasons: - 1. It is clear from the history of the case that the assessee firm has been dealing in real estate business from the very beginning. Assessee itself has admitted that the business is sale of flats. Therefore, any profit from sale of space has to be treated as business income. 2. Assessee's claim that "the amount invested was not in the nature of trade or for revenue purposes but a hedging against inflation" is not acceptable because within a year after getting possession it started selling the space in parts. Thus the purpose of purchase of space was to later sell it for a profit. In deciding whether it was a business activity or not, one has to go by the intention behind the whole transaction. The intention has to be judged by actions as well as the history. In this case both action an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause intentions are more important than what is written in partnership deed. The fact that the assessee has indulged in trading of space inDevikaToweritself shows that terms and conditions of the partnership deed have been violated. In view of the points cited above provision of section 145 are being involved and the investment in the space inDevikaToweris to be treated as stock-in-trade and profit from sale of the said space is to be treated as business income." 5. In appeal before the first appellate authority, the submissions made on behalf of the assessee were as under: - "The learned A.R. of the assessee submitted on the other hand that the assessee had got the property during assessment year 1981-82, construction completed during 1985-86 which was sold after a gap of 6-7 years during assessment years 1987-88, 1988-89 and 1991-92 and capital gain was returned in the income and purchases were only considered as investment in past assessments. The assessee has earned income from these investments from assessment year 1987-88 till 1992-93 to the extent of Rs. 10,62,934. The assessee has not put any money in investment thereafter i.e., 1981-82. The treatment of Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t after effecting sale and complying all formalities in regard thereto. 2. 7. Attention was also invited to page 19 of the paper book which is page 3 of the partnership deed. Paragraph 12 of the same was highlighted which reads as under: "12. The partnership is for definite tenure to last till the completion of project as mentioned hereinabove." 8. Attention was invited to Eclat Construction (P.) Ltd. v. CIT[1988] 172 ITR 84 (Pat.) and CIT v. Madan Gopal Redhey Lal [1969] 73 ITR 652 (SC). Inviting attention to the partnership deed and balance sheet, it was contended that right from 1981-82, it has been shown as an investment. Attention was also invited to (sic) 91 ITR 80 for the proposition that accounting entry is an extremely important piece of evidence. Attention was also invited to Arjun Kapur v. Dy. CIT[1999] 70 ITD 161 (Delhi) at page 164. It was also contended that there is no new fact to come to the conclusion that there is a difference in the preceding assessment year. It is the same property and the same assessee. Attention was invited to (sic) 141 ITR 817. Reliance was placed upon Radhasoami Satsang v. CIT[1992] 193 ITR 321(SC). 9. Learned DR. on the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessarily be required to see the past conduct to determine the fact and if the Assessing Officer has done this exercise which he is duty bound to perform as Courts have consistently held, then simply because in the earlier years the stand of the assessee has been accepted is no reason why the authorities could not question and look into the action. It was further argued that it is not as though the Assessing Officer has acted hastily and without assigning any reason, the Assessing Officer, it was argued has given sufficient opportunity and hearing before concluding. Relying upon the same, it was argued, he concluded the intention of the assessee clearly brings out the fact that it is consistently being sold every year in the face of such categorical evidence to rely upon some decision given in a different context would hardly advance the case of the assessee. With reference to the attention invited to the partnership deed, it was contended that they do not advance the case of the assessee and even otherwise, it is argued that it is a partnership at will even then no material help is rendered to the assessee. So, relying on the partnership deed will not help even a single transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g heard to lead whatever evidence he would like to lead to show that the departure from the consistent stand should not be made. Then, in such an eventuality, if the Assessing Officer still feels that the consistency would in fact result in a grave error of law, then he is required to give his reasons for not accepting the assessee's contentions. In facts available on record, in the present case, there is no dispute that the Assessing Officer has put the assessee to notice has given him full hearing and given specific reasons for making a departure in the year under consideration. Simply because in the earlier assessment years the Department has been accepting the assessee's stand, that reason by itself in the peculiar case of this kind is not a good enough reason as over a period of time, the conduct of the assessee clearly gives effect to the intention of the assessee and by way of this continuous sale which the assessee calls is investments is actuality its stock-in-trade and has rightly been held to be so by the Assessing Officer. It is a settled legal proposition that the Assessing Officer in the course of the assessment proceedings is required to examine and ascertain the act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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